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Why Low Food Inventories Continues To Push Prices Higher - 11 11 2021 10 34 40 AM

October food CPI accelerates (KR)

CPI for food at home increased 5.4% YOY in October, accelerating from 4.5% in September. Both the food and food and beverages category saw similar increases in CPI at 5.3% YOY and 5.1%, respectively.

However, the meats, poultry, fish, and eggs category had the highest level of inflation at 11.9%, accelerating from 10.5% in September.

Why Low Food Inventories Continues To Push Prices Higher - cpiii

Koninklijke Ahold Delhaize Q3 (AD.AMS)

US SSS ex-fuel increased 2.9% with a 0.8% calendar headwind, lapping 12.4% in the prior year. Food Lion is the company's fastest-growing U.S. brand which has had 36 consecutive quarters of positive SSS.

U.S. online sales grew 53%. Operating margins in the U.S. contracted 20bps. In Europe, SSS were flat with a 40bps headwind from floods in Belgium. Online sales in Europe grew by 20.1%. Operating margins in Europe were flat.

Management raised expectations for operating margins for the year by 10bps to 4.4% due to performance year to date. Management said the supply chain was "pretty normal" in Europe, while it is "a little bit more challenged."

Inflation in the Northeast was 3% in Q3 and expected to rise further in Q4. Management described the pricing environment as rational in the U.S. while the inflation rate is lower in Europe.

The U.S. conventional grocers have been the biggest beneficiaries of the pandemic in food retail. They have also been able to pass on inflationary pressures with less competitive pressures from strained inventory levels.